A Category 5 Storm … Headed Our Way

1 December 201013,519 viewsOne Comment

I’m honored to have Norman R. Augustine as this month’s guest columnist. Augustine chaired the National Academies committee that wrote the enormously influential 2005 report Rising Above the Gathering Storm: Energizing and Employing America for a Brighter Economic Future. The report, which called attention to the growing challenges to U.S. competitiveness, and Augustine’s tireless efforts to publicize its troubling findings, resulted in a presidential initiative and the America COMPETES legislation to enact its recommendations. The recommendations included doubling the funding for basic research over seven years and measures to improve science and math education from kindergarten through graduate school. For the five-year anniversary of the report, Augustine’s committee issued Rising Above the Gathering Storm, Revisited: Rapidly Approaching Category 5 to report on progress in addressing the first report’s recommendations and to update the global competitiveness environment. In this piece, Augustine provides a commentary on U.S. competitiveness challenges.~ Steve Pierson, ASA Director of Science Policy, pierson@amstat.org

Contributing Editor
Norman R. Augustine is the retired chair and CEO of the Lockheed Martin Corporation and a former undersecretary of the Army. His exemplary public service record includes chairing the 2005 National Academies’ Rising Above the Gathering Storm Committee and the 2009 Review of U.S. Human Spaceflight Plans Committee.

Today’s younger generation is now the first in our nation’s history to be less well-educated than their parents. They are also the first in our nation’s history to almost certainly be less healthy than their parents. And surveys show two-thirds of today’s parents believe their children are likely to endure a lower standard of living than they, themselves, enjoyed.

As Tom Friedman, in his remarkable book, The World Is Flat, noted, “Globalization has accidentally made Beijing, Bangalore, and Bethesda next door neighbors.” A major consequence of this is that we no longer compete simply with our neighbors down the street for business or a job. We now must compete with our neighbors in Taiwan, Toulouse, and Timbuktu. (On second thought, I’ve been to Timbuktu, and that may be a bit of a stretch!) Furthermore, this new neighborhood is growing rapidly, with some 3 billion would-be capitalists entering the global market following the restructuring of the world’s geopolitical system that occurred late in the past century.

This has been called “The Death of Distance” by Frances Cairncross, writing in The Economist. It addresses the phenomenon wherein parties to many transactions no longer need to be in close physical proximity; that is, “distance” no longer matters.

Five years ago, concerned about the impact of this trend, a bipartisan group of legislators in the U.S. Senate and House of Representatives asked the National Academies of Science, Engineering, and Medicine to conduct a study of America’s ability to compete in the years ahead in the new global economy. The National Academies formed a 20-person committee of CEOs, university presidents, Nobel laureates, and former presidential appointees to address the issue. The committee’s report, recently updated, has been widely referred to as the “Gathering Storm” report, after the first line in its title. It prompted the passage of the America Competes Act, which is now before Congress for renewal.

In essence, the report poses the question to a hypothetical CEO planning to construct a new manufacturing plant, administrative office, or research laboratory, “In which of two prospective countries should the facility be built?” County “A” has the second-highest corporate tax rate in the world, while Country “B” offers a five-year tax holiday to new businesses. In country “A,” assembly labor costs $25 per hour with an additional 35% in benefits. In country “B,” the going rate is $1.50 per hour with no benefit costs. In country “A,” the average employee with a high-school diploma comes from the bottom quartile of the global class; in country “B,” they come from the top decile. Firms in country “A” spend twice as much on litigation as on research, whereas, in country “B,” litigation costs are minor, if they exist at all. Further, country “A” is projecting only modest growth in its domestic market, while country “B” continues to enjoy a sustained 10% annual real growth rate.

Country “A” in this real-world scenario is the United States. Country “B” is any of several Asian nations.

So what can be done to ensure that Americans in the future can compete for business and jobs and enjoy a standard of living approximating the best available? The Gathering Storm committee concluded in its original report that the only answer is through innovation. The Academies’ conclusion was strongly influenced by a number of studies that show that, over the past half-century, 50% to 85% of the increase in the nation’s gross domestic product (GDP) is attributable to advancements in science and engineering. While the overall economy has deteriorated significantly since the Academies’ report was released, other aspects of the competitiveness picture have changed as well. For example, one new threat has emerged and another of major proportions has not been diminished. These both relate to education—higher education and K–12 education, respectively.

Five years ago, U.S. universities were unarguably the finest in the world and there was little, if any, reason to expect that situation might change significantly. Suddenly, however, as tax revenues have declined precipitously due to the economic downturn, U.S. public institutions find themselves facing severe budget shortfalls—some requiring Draconian corrective measures. Correspondingly, private institutions of higher education have seen precipitous declines in the value of their endowments. The steps taken by U.S. academic institutions to offset the current budget shortfalls have not gone unnoticed elsewhere in the world. Lists are being made of outstanding research faculty members who might be attracted to leaving the United States. This possibility is exacerbated in our engineering schools by the fact that more than 40% of faculty came from abroad in the first place.

The underlying sustainable source of our nation’s engineering talent is America’s K–12 public school system, or, more precisely, system of systems—with its 13,000 independent school districts and 3.2 million teachers.

When the Gathering Storm report was prepared, this system of systems was performing abysmally by global standards. Today, five years and major efforts later, the system is still performing abysmally by global standards. America, of course, has some outstanding schools, some outstanding teachers, and some outstanding students. But, in international tests in math and science, U.S. students rank near the bottom of the global class. Our 17 year olds rank 25th in science and 21st in math among the 30 participating nations.

You may recall how strongly we reacted when we discovered a few years ago that our Olympic basketball team was no longer ranked first in the world. Yet, we seem indifferent to the fact that we rank 17th among industrialized nations in high-school completion rate and 19th in college completion rate. Or that China is already producing more English-trained engineers than we are. And that only 4.5% of U.S. baccalaureate degrees are awarded in engineering, whereas the corresponding share is 33% in China; in Singapore, even more. In almost all of these parameters, we were first—or nearly first—just a few decades ago.

How can this be? Well, for openers, in America’s public schools, 69% of 5–8-grade students are taught math by teachers who possess neither a degree nor a certificate in math. Fully 93% of these students are taught physical sciences by teachers with neither a degree nor certificate in the physical sciences. In fact, more than half of the nation’s science teachers have not had a single college course in the field they teach. Bill Gates has remarked, “When I compare our high schools to what I see when I’m traveling abroad, I’m terrified for our work force of tomorrow.”

Management consultant McKinsey & Co. has sought to link GDP—a not unreasonable surrogate for the standard of living in a country with a relatively stable population—with K–12 educational achievement. It concludes that if U.S. youth could match the performance of students in Finland, our nation’s economy would increase by about 2 trillion dollars—the equivalent of nearly three stimulus packages—every year.

It is tempting to say, “Let market forces solve the competitiveness and standard of living problems.” But that, from an American perspective, is the problem. Market forces are solving the problem. American companies are solving the problem by creating jobs outside the United States. Intel’s Howard High’s comments of several years ago are fairly representative: “We go where the smart people are. Now our business operations are two-thirds in the U.S. and one-third overseas. But that ratio will flip over in the next 10 years.”

Are we as a nation doomed? No, at least not yet. But, if we are to prosper in the new global economy, we must invest in new knowledge, fix our educational system, and create an environment far more friendly to innovation.

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# 3 December 2010 at 8:21 pm

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